ACG - Agency Consulting Group

The PIPELINE

A national monthly newsletter for agency principals dedicated to agency management topic

PERFORMANCE EVALUATIONS

It has always been the opinion of Agency Consulting Group that evaluations are important ONLY as a development tool for an employee. Further, one should only evaluate performance that can be controlled by the employees. This requires the standards of performance to be known, to be written and to be acknowledged by the employee.

A Position Description should set the standards of performance for an employee. For that reason, all of the Position Descriptions written for every position, albeit President, Chairman or COO all the way down the ladder to file clerk and receptionist, are functional in nature with the top four or five functions of the position succinctly described. The description must include the standards of that function that would define a “good” job. An Employee Handbook describing the general standards, procedures and guidelines should be given to every employee with a signature confirmation that the employee understands what the position in details.

We have seen hundreds of rating forms trying to give a numerical identification describing how well an employee performs a specific function of the job. Who decides whether the employee rates a 3, a 4 or a 5 for that function? Why is it important? If the Position Description or the Handbook properly describes the standard defining successful attainment of that function there are only two possible answers to an evaluation of that function: Either the employee has successfully achieved the appropriate performance level for that function or she or he has not. No performance level, acceptable or unacceptable remains at the same level consistently. There may be times that even the best performer fails to achieve a standard. That doesn’t mean that the employee should be criticized as failing to achieve acceptable standards. And even a blind squirrel finds a nut once in a while. That doesn’t mean an employee that can’t seem to get a function right qualifies as an acceptable performer just because they have done the function right occasionally. The importance of the Evaluation is to gain agreement on the general level of performance of the employee and how to correct any deficiencies and develop that employee further during the next rating period.

This leads us to the most important part of any Evaluation, the Development Plan. In our evaluations, the historic performance to standards forms half of the employee’s rating, and the achievement of the last development plan forms the other half. In the businesses that we serve, no employee is retained, promoted or given raises for simply doing a good job in the same position without any form of evolution or improvement. No, not every employee strives for higher positions. It is perfectly acceptable to find one’s niche and become ever more competent and valuable within that role. However, those employees who have been with a firm for many years repeating the same tasks as when they were hired and trained for are not considered valuable employees, they are drones. Few insurance businesses are large enough to warrant any drones in their employ. Every agency and most insurance companies recognize in order to qualify for a raise each year, they are required to be more productive for the Company every year. Productivity can be defined as production and it can be defined as handling an ever-growing book of business. But it can also mean growing more competent and more efficient in whatever role the employee plays to permit him or her to take on more responsibility and become more valuable for the employer.

The order of a normal evaluation is to evaluate the current functions, review success or failure from the previous period development, and create the new development plan that illustrates both function improvement areas and career development expected in the next rating period.

The development plan might illustrate further function development, even for role that the employee successfully achieved in the rating period. Many employers use this time to evolve Position Descriptions. In our view, Position Descriptions should always have an “expiration date” of one year, requiring the employee and manager to review the Position Description for accuracy. We know that jobs change. Position Descriptions, including the functions and the standards for the functions, should evolve as the jobs change to always be current. The Evaluation is a great time to conduct that review, change the Position Description to the agreed upon role of the employee and consider the development areas that would permit the employee to successfully perform his or her role in the next rating period.

In addition to the development of the job and of the functions, a key in most organizations is how the employee will develop him or her self to become more valuable to the Company within the next rating period. That is a shared development plan that the manager and employee create during the evaluation to prompt the evolution of the employee in the next rating period. The employee knows that they will be supported toward this development and that it will be included in the employee’s next evaluation as well.

Pay raises should NOT be coincidental with evaluations – EVER. If the employee is expecting a pay raise, they hear nothing during the evaluation either before or after the disclosure of how much they are to receive. Either they are pleased and disregard any negative comments thereafter or before in favor of the good news of the raise, or they are disappointed and do not hear any positive comments or constructive criticism because they are upset about the amount offered to them.

The best result is achieved by having a pay raise considered three months after the evaluation. In this way, if the evaluation is not sufficient to warrant the expected raise, the employee has several months (including interim evaluations, if desired) to work their way up to the performance level justifying the raise. If their evaluation is glowing, they understand that if their performance slips in the interim, it could still affect their raise. And, if the evaluations are given twice each year, there is never a period of more than six months between raises and evaluations, causing the employee to consider performance during their work efforts if either the appreciation of their employer or money is their primary motivator.

All of this discussion is meant to support the frequent evaluation of employees, but not by a scale or measuring-stick evaluation tool. Let the evaluation be a tool that the employee and the employer use to determine how well they do the job for which they are hired and how they can improve themselves to either make more money or to gain a higher profile in the company.